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planned scope of the audit. Your audit committee chair will be given the opportunist- to provide us with any additional information he/she deems relevant and ask any questions about the audit process. Phase 2: Primary fieldwork and testing Planning/Risk Assessment — In order to design our auditing procedures according to your unique operating environment, we will use various methods to gain an understanding of processes and internal controls. We will use the results of these inquiries and tests to assess risks and to further tailor our governmental audit programs. This process is more extensive in the first year as a base understanding is gained by the audit team and may require a specially scheduled visit of 1-2 days. In future years, the process will consist primarily of updating our understanding for any procedural or personnel changes that may have occurred. Our standard planning/risk assessment procedures might include these tests: Document financial systems Review control activities Description We will obtain any existing accounting policies and/or procedures manuals to gain an understanding of the operating environment. If no such materials are available, we have a form of basic questions that will guide you through the process of documenting your actual practices. A questionnaire will be provided that describes various typical control activities by transaction class (i e., cash, accounts receivable, long-term debt, etc.). We will ask you to answer these questions and provide us with any additional information that may be helpful to us in understanding the internal control structure. Based on the responses to these questions, we will determine the 2-3 "key controls" over each transaction type. _ --- ._....... Walkthroughs Once we have an understanding of internal controls and have identified the kev controls, we will select a small sample of actual transactions and "walk through" each of the key controls to determine if the controls have been implemented and documented appropriately. The typical areas for which walk-throughs are performed are: cash disbursements, cash receipts, pavroll, and general journal entries, though other areas may also be tested at this time. Establish materiality and major Using the trial balance, the audit team will test the funds appropriateness of major funds. Materiality will then be calculated by opinion unit. Our substantive tests generallc require the audit team to test all individually s �cant items P-14 Rehmann